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High Frequency Traders : Taking Advantage of Speed

Aït-Sahalia, Yacine - 2013

We propose a model of dynamic trading where a strategic high frequency trader receives an imperfect signal about future order flows, and exploits his speed advantage to optimize his quoting policy. We determine the provision of liquidity, order cancellations, and impact on low frequency traders...

Persistent link: https://www.econbiz.de/10013074299

Counterfeit-Product Trade

Grossman, Gene M.; Shapiro, Carl - 2021

We analyze a two-country model of trade in both legitimate and counterfeit products. Domestic firms own trademarks and establish reputations for delivering high-quality products in a steady-state equilibrium. Foreign suppliers export legitimate low-quality merchandise and counterfeits of...

Persistent link: https://www.econbiz.de/10013215713

On Frequent Batch Auctions for Stocks

Jagannathan, Ravi - 2019

I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one second apart batch auctions results in nearly the same...

Persistent link: https://www.econbiz.de/10012861734

Welfare and Optimal Trading Frequency in Dynamic Double Auctions

Du, Songzi - 2014

This paper studies the welfare consequence of increasing trading speed in financial markets. We build and solve a dynamic trading model, in which traders receive private information of asset value over time and trade strategically with demand schedules in a sequence of double auctions. A...

Persistent link: https://www.econbiz.de/10013045292

Have Financial Markets Become More Informative?

Bai, Jennie - 2014

The finance industry has grown, financial markets have become more liquid, information technology has undergone a revolution. But have market prices become more informative? We derive a welfare-based measure of price informativeness: the predicted variation of future cash flows from current...

Persistent link: https://www.econbiz.de/10013053306

Dark Trading at the Midpoint : Pricing Rules, Order Flow, and High Frequency Liquidity Provision

Bartlett, Robert - 2015

Using over eight trillion observations of market data, we use a regression discontinuity design to analyze the effect of increasing the minimum price variation (MPV) for quoting equity securities in light of recent proposals to increase the MPV from $0.01 to $0.05. We show that a larger MPV...

Persistent link: https://www.econbiz.de/10013020713

Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets

Itō, Takatoshi; Yamada, Kenta; Takayasu, Misako; … - 2021

With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit … pairs—can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage … arbitrage opportunity and places orders for multiple transactions—two in negative spreads and three in triangular arbitrage …

Persistent link: https://www.econbiz.de/10013310382

The Market for OTC Derivatives

Atkeson, Andrew - 2013

We develop a model of equilibrium entry, trade, and price formation in over-the- counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders...

Persistent link: https://www.econbiz.de/10013084727

Valuation in Over-the-Counter Markets

Garleanu, Nicolae - 2009

We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or...

Persistent link: https://www.econbiz.de/10012767429

To Pool or Not to Pool? Security Design in OTC Markets

Glode, Vincent; Opp, Christian; Sverchkov, Ruslan - 2022

We study security issuers' decision whether to pool assets when facing counterparties endowed with market power, as is common in over-the-counter markets. Unlike in competitive markets, pooling assets may be suboptimal in the presence of market power - both privately and socially - in...

Persistent link: https://www.econbiz.de/10013294379